As businesses take their first cautious steps toward reopening, Canadians should brace themselves for the possibility of seeing a new fee tacked on to their bill: a COVID-19 surcharge.
Retailers have been hit hard by the pandemic, as social distancing requirements forced many of them to shut down, and the ones that remained open could serve only a fraction of their previous clientele.
New numbers released Friday showed retailers had their biggest sales plunge on record in March, so many of those that have survived the pandemic are asking customers to help them cover the costs of COVID-19 while their businesses heal.
A steak house in Missouri went viral on social media this week when a customer noticed an extra line tacked on their bill — $2.19, or an extra five per cent on the $43.85 price of their meal — a “COVID-19 surcharge.”
‘Scuse me … what? A covid surcharge…? <a href=”https://t.co/IYcrkcqIJ3″>pic.twitter.com/IYcrkcqIJ3</a>
It’s not just American businesses, either.
Jonathan Alward with the Canadian Federation of Independent Business says his group’s members need to pass on some of those added costs at the moment.
“If you look at the cost of PPEs (personal protective equipment), all the sanitizer products [and] the extra staff hours it takes to make sure they’re following all the protocols they need to, passing these costs on to customers in many cases is necessary.
“They’re not doing this because they want to; they’re doing this because they absolutely have to.”
Joanne Rempel is one such business owner who has added a small surcharge to her prices since reopening to cover COVID-related costs.
Rempel has run the Colors Beauty and Wellness salon in Winnipeg for the last 17 years, but like most businesses she shut down in March once lockdown rules set in. Manitoba had a milder outbreak than many other provinces, so the province gave businesses such as hers permission to reopen recently, which she did, on May 4.
That’s not to suggest it’s business as usual.
Under normal circumstances, Rempel’s salon has 12 stylists seeing around 10 clients each a day. But because she’s had to limit the number of people in her store at any given time because of social distancing, only half her staff is working, and they’re each seeing four to five clients only.
The salon has a rigorous policy of using face masks, sanitizers and other cleaning products, and those all come at a cost.
“We tried to absorb it all in the beginning,” she said. “But our masks have doubled in price.”
Rempel said she had a stockpile of masks before the lockdown that cost her about 50 cents each. But the salon quickly used up their entire supply, and she can’t find replacements for less than $2 each. Limiting the amount of customers she can handle means revenue is down by about half, but costs for items such as masks and sanitizers have more than doubled.
That’s why she has added a $2 surcharge to pay for those types of supplies, and she says customers have been more than happy to pay it.
“It gives them the comfort of knowing that we are going to survive,” she said.
Transparency is key
Being upfront about the added cost and spending it openly on COVID-related expenses is the right approach, marketing expert David Soberman said.
“The first thing is they need to be fully transparent,” said the professor at the Rotman School of Management at the University of Toronto. “Before a customer agrees to buy something, they [the company] need to make sure that the customer is aware that those fees will be applied to the bill, and they should be aware completely of what the actual amount will be so that they can make a decision of whether or not to complete the transaction or not.”
Paying for things like PPE for their workers, and adding in extra cleaning on top of the usual routines add significant costs to their businesses, so it’s only fair for consumers to bear some of that brunt, he said. At the same time, they are walking a tightrope in asking their customers to pay more at a time when they are also feeling the pinch.
“On the other hand, you also have people who may have lost their jobs, lost a significant amount of income. So they’re going to feel quite upset about having to pay extra — even if in some cases it’s justified.”